Tokyo Bay’s Properties Are Biggest Olympic Win Beneficiaries

Tokyo Bay area property prices stand to benefit the most in the lead up to the 2020 Olympic Games, adding to the recovery in the city’s real estate values after 20 years of declines.

About 90 percent of the competition venues will be located within 8 kilometers (5 miles) of the Olympic Village in Harumi, an area of reclaimed land about 2 miles southeast of downtown Tokyo, according to the Tokyo 2020 Bid Committee. Apartment prices in the area may increase as much as 20 percent, said Sanyu Appraisal Corp., a property appraisal company.

Tokyo’s victory coincides with a recovery in the nation’s property market where residential prices have been declining since 1992, amid expectations that Prime Minister Shinzo Abe’s policies will end 15 years of deflation. Just as the summer Olympics in 1964 helped turn vast, empty tracts of land in Komazawa into a residential neighborhood in central Tokyo today, the 2020 Games will help Tokyo Bay real estate, said Deutsche Securities Inc.

“With the improvement in infrastructure, such as parks, stadiums and transportation, the property values in the bay area may increase dramatically,” Yoji Otani, a Tokyo-based analyst at Deutsche Securities, said without giving an estimate. “There are just idle land sites in the Harumi area. It will be like turning something that’s not worth anything into gold.”

Luring Investors

Apartment prices in Harumi, at about 828,000 yen ($8,300) per square meter (10.76 square feet), are below the average of 868,000 yen per square meter in Tokyo’s 23 wards, according to the Real Estate Economic Research Institute Co. That compares with 877,000 yen per square meter in Komazawa, where the previous games were held, it said.

Tokyo out-polled Istanbul 60-36 in a runoff vote among members of the International Olympic Committee meeting in Buenos Aires over the weekend. The 2020 Olympics will mark Japan’s fourth time as host, after the Tokyo Summer Games in 1964, the Winter Games in Sapporo in 1972 and Nagano in 1998.

The capital is planning its biggest housing complex in 42 years to lodge athletes in Harumi. The 95.4 billion yen Olympic Village complex will occupy a 44-hectare (109-acre) parcel of land next to Tokyo Bay and will be financed by developers, Kenichi Kimura, who oversees the finances for the city’s bid at the Tokyo Metropolitan Government, said in an interview in July.

Olympic Village

The Olympic Village complex, which is to be located in the middle of two main competition zones, will consist of luxury apartments surrounded by Tokyo Bay, with a view of the Rainbow Bridge that connects central Tokyo with the Odaiba area, which sits on reclaimed land, the bid documents show. It will comprise 10,860 residential units spread across about two-dozen buildings, along with training gyms, dining halls, seaside restaurants and parks, according to the bid documents.

The economic effect on the construction industry will be about 475 billion yen, while the property sector will lure 152 billion yen, the IOC estimates.

“We expect further development of Tokyo Bay to particularly benefit landowners” in Tokyo Waterfront City, Peter Eadon-Clarke and Nat Ishino, analysts at Macquarie Securities Ltd., said in a report published last month.

Landowners in the Tokyo Bay area include Mitsui Fudosan Co., Mitsubishi Estate Co., Sumitomo Realty & Development Co., Orix JREIT Inc., NTT Urban Development Corp., Sekisui House Ltd. and Daiwa House Industry Co., according to the report.

Waterfront City

Shares of Orix JREIT rose 2.8 percent to 113,800 yen, the highest in three weeks, at the close of trading in Tokyo. NTT Urban gained 2.8 percent to 133,500 yen, the highest since July 24. Mitsui Fudosan, which gained 2.5 percent, surged to the highest level since April 12, while Daiwa House had the biggest gain since June 28, rising 3.2 percent to 1,880 yen.

Residents in Tokyo Waterfront City are expected to quadruple to 47,000 in 2016 from 11,030 in 2010, while the working population will double to 90,000 in 2016 from 47,000 in 2010, according to an estimate by Macquarie and the Tokyo government.

“The Olympic Games may attract a new wave of investors to housing in the bay area, such as those who live outside of Tokyo,” Daisuke Fukushima, a Tokyo-based analyst at Nomura Securities Co., said. “That will push up property prices.”

Fukushima didn’t give an estimate for how much he expects prices to rise.

Falling Prices

Residential land prices in Tokyo have been falling in the last two decades, except in 2007 and 2008, according to the land ministry. The price decline narrowed to 0.7 percent as of Jan. 1 this year, from 1.6 percent last year, it said.

Not all expect Tokyo’s victory to help boost prices.

Without rising wages, apartment prices may not increase, said Curtis Freeze, who helps oversee about $320 million as chief investment officer at Prospect Asset Management in Tokyo. Wages excluding bonuses and overtime dropped for a 14th straight month, according to the Ministry of Health, Labour and Welfare data released on Sept. 3.

“The price of land will go higher,” said Freeze. The question is whether developers can increase prices to recoup the higher land costs, he said.

Mitsubishi Estate Co., Japan’s biggest developer by market value, and Mori Building Co., the country’s second-biggest closely held developer, expect the games to benefit developers.

“It will provide a great opportunity for Tokyo to become more international in a market place where the competition among major cities in Asia has intensified,” Hirotaka Sugiyama, chief executive officer of Mitsubishi Estate, said in a statement. “As a developer, we will take this opportunity to consider our contribution.”

The economic effect from the Olympic Games would be approximately 3 trillion yen for Japan, according to the Tokyo 2020 Bid Committee’s website.

“This is an exciting opportunity for private and public sectors to come together to accelerate urban regeneration, which is essential for revitalizing the economy,” Shingo Tsuji, president and chief executive officer of Mori Building, said in a statement. “The world attention will be upon Tokyo.”

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